Calculating the Return on Investment (ROI) for solar panels involves comparing the upfront installation costs against the long-term energy savings. The primary factors include the size of the system, the local cost of electricity, and government incentives like the federal Investment Tax Credit (ITC).
Understanding the Inputs
System Size: Most residential systems range from 5kW to 10kW. A larger system costs more but generates more power.
Cost Per Watt: The national average is approximately $2.50 to $3.50 per watt, including parts and labor.
Peak Sun Hours: This is not just daylight, but the intensity of sun. High-sun states like Arizona average 5.5+ hours, while cloudier states may average 3.5.
Electricity Rate: Your utility company's price per kWh. The higher this rate, the faster your solar panels pay for themselves.
Incentives: The US Federal Tax Credit currently covers 30% of the total installation cost.
Typical Solar Payback Example
Scenario
System Size
Net Cost
Estimated Payback
Small Home (Optimized)
4 kW
$8,400
6.5 Years
Average Family Home
7 kW
$14,700
7.8 Years
Large Estate
12 kW
$25,200
8.2 Years
Maximizing Your Solar Investment
To ensure the best ROI, consider the orientation of your roof; south-facing roofs typically produce the most energy. Additionally, monitor your system's performance annually to account for the minor degradation (usually 0.5%) that occurs as panels age. By locking in your energy costs today, you protect yourself against rising utility rates in the future.
function calculateSolarROI() {
var systemSize = parseFloat(document.getElementById('systemSize').value);
var costPerWatt = parseFloat(document.getElementById('costPerWatt').value);
var sunHours = parseFloat(document.getElementById('sunHours').value);
var elecRate = parseFloat(document.getElementById('elecRate').value);
var incentives = parseFloat(document.getElementById('incentives').value);
var degradation = parseFloat(document.getElementById('degradation').value) / 100;
if (isNaN(systemSize) || isNaN(costPerWatt) || isNaN(sunHours) || isNaN(elecRate)) {
alert("Please enter valid numeric values for all fields.");
return;
}
// Calculations
var grossCost = systemSize * 1000 * costPerWatt;
var netCost = grossCost * (1 – (incentives / 100));
// Annual Production (System Size * Sun Hours * 365 * 0.78 Efficiency Factor)
var annualKwh = systemSize * sunHours * 365 * 0.78;
var yearOneSavings = annualKwh * elecRate;
// Payback period (Simple calculation)
var payback = netCost / yearOneSavings;
// 25-Year Cumulative Savings calculation including degradation
var totalSavings = 0;
var currentYearProduction = annualKwh;
for (var i = 0; i < 25; i++) {
totalSavings += currentYearProduction * elecRate;
currentYearProduction = currentYearProduction * (1 – degradation);
}
var netProfit = totalSavings – netCost;
// Formatting outputs
document.getElementById('grossCost').innerHTML = '$' + grossCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('netCost').innerHTML = '$' + netCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('yearOneSavings').innerHTML = '$' + yearOneSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('paybackPeriod').innerHTML = payback.toFixed(1) + ' Years';
document.getElementById('totalSavings').innerHTML = '$' + netProfit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Display results
document.getElementById('roi-results').style.display = 'block';
}